Commercial Litigation and Arbitration

RICO: Owners of Free Floating Vessels Not Subject to RICO Liability via Outer Continental Shelf Lands Act’s Provisions Extending US Law to Seabed and Permanently or Temporarily Attached Installations

Brown v. Offshore Specialty Fabricators, 663 F.3d 759 (5th Cir. 2011):

This appeal involves a putative class action brought against several oil and gas companies and several companies that provide labor for offshore oil and gas projects. The plaintiffs allege violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and the Outer Continental Shelf Lands Act (OCSLA).***

The plaintiffs contend that the defendants maintain a hiring scheme to employ foreign workers on the Outer Continental Shelf, in violation of RICO and the OCSLA. According to the plaintiffs, the defendants employ workers who are neither citizens nor workers authorized to be in the United States. The plaintiffs argue that the defendants' conduct violates the Immigration and Nationality Act (INA), and therefore qualifies as racketeering activity prohibited by RICO. Although the OCSLA provides more specific rules for employing foreign workers on the Outer Continental Shelf — the OCSLA "manning requirements"— the plaintiffs contend that the defendants also violate these requirements. The plaintiffs further assert that this unlawful hiring scheme results in depressed wages and degraded working conditions to the detriment of U.S. citizens and legal residents who work on the Outer Continental Shelf.

The initial complaint was filed on December 17, 2004. Numerous amendments changed the claims and parties involved, but only three claims have survived for this appeal: (1) a RICO claim against the "Service Defendants” [companies in the business of offshore oil and gas exploration], (2) an OCSLA damages claim against all defendants, and (3) an OCSLA enforcement claim against all defendants.***

The district court granted summary judgment to the Service Defendants on the RICO claim for two reasons: (1) The laws of the United States, including the INA, extend only to installations and devices attached to the seabed of the Outer Continental Shelf. Because the Service Defendants operate free-floating vessels they cannot have violated the INA and thus cannot have violated RICO. (2) The Service Defendants possess Coast Guard-issued exemptions to the OCSLA manning requirements that allow them to lawfully employ foreign workers on the Outer Continental Shelf. The plaintiffs failed to present evidence to undercut the validity of these exemptions.***

We begin by reviewing the district court's grant of summary judgment dismissing the plaintiffs' RICO claim. The plaintiffs contend that the district court erred in granting summary judgment because, regardless of the free-floating character of the Service Defendants' vessels, the INA still applies to the Service Defendants' conduct. In the plaintiffs' view, the INA is triggered when foreign workers step foot on U.S. soil before being taken to the Outer Continental Shelf, and remains effective even if those workers perform their work on a free-floating vessel. The plaintiffs argue that the Service Defendants do not follow the strictures of the INA in employing foreign workers, and thus engage in racketeering activity under RICO. See 18 U.S.C. § 1961(1)(F).

We disagree. Violations of the INA can, of course, constitute racketeering activity prohibited by RICO. Id. The sections of the INA that qualify as racketeering activity, however, do not on their own terms include the Outer Continental Shelf within their territorial reach. See 8 U.S.C. §§ 1101(a)(38), 1324, 1327, 1328 (prohibiting certain conduct within the United States and defining the United States as "the continental United States, Alaska, Hawaii, Puerto Rico, Guam, the Virgin Islands of the United States, and the Commonwealth of the Northern Mariana Islands."). United States law, including the INA, is made applicable to the Outer Continental Shelf through the OCSLA. 43 U.S.C. § 1333(a)(1). See also Offshore Logistics, Inc. v. Tallentire, 477 U.S. 207, 217-20, 106 S. Ct. 2485, 91 L. Ed. 2d 174 (1986) (defining the purpose of the OCSLA). The OCSLA provides:

The Constitution and laws . . . of the United States are extended to the subsoil and seabed of the outer Continental Shelf and to all artificial islands, and all installations and other devices permanently or temporarily attached to the seabed, which may be erected thereon for the purpose of exploring for, developing, or producing resources therefrom, or any such installation or other device (other than a ship or vessel) for the purpose of transporting such resources, to the same extent as if the outer Continental Shelf were an area of exclusive Federal jurisdiction located within a State . . . .

43 U.S.C. § 1333(a)(1). The plaintiffs concede that the Service Defendants' vessels are free floating, and are neither permanently nor temporarily attached to or erected on the seabed. The OCSLA does not, therefore, extend the reach of United States law, including the INA, to the Service Defendants' vessels. The plaintiffs cite no authority for their theory that the INA, once triggered by workers stepping foot on U.S. soil, remains effective forever, and we are unpersuaded by such argument. We hold that the Service Defendants do not violate RICO because the law that would make their conduct racketeering activity--the INA--does not apply in the place where that conduct occurred, namely vessels floating on the waters of the Outer Continental Shelf.

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